HPAI: U.S. Market Impacts
DR . TOM E L A M ( T HOM A SELA M@ FAR MECON .COM )
FAR MECON L LC
JU N E 2 8 , 2 0 1 5
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Glossary
APHIS: Animal and Plant Health Inspection Service, a USDA agency
HPAI: Highly Pathogenic Avian Influenza
Breeders: Male and female poultry that produce fertile chicken and turkey hatching eggs
Layers: Female chickens that produce infertile eggs for human consumption
Live Production: Weight of live poultry delivered to a processing plant
RTC Production: Ready-to-cook poultry, basically carcass weight with giblets
Poult: A young sexually immature domestic chicken, turkey, pheasant, or other fowl
Depop/Repop: Depopulation and repopulation of an animal production facility
Shell (Table) Eggs: Eggs sold as intact eggs for human consumption
Breaker (Breaking) Eggs: Eggs processed into a variety of egg products used in food production
Hatching Eggs: Egg produced to be hatched into breeding or meat-type poultry
UB: Urner Barry, a private food price reporting company
Stages of Poultry Reproduction: Pedigree, Great-Grandparent(GGP), Grandparent (GP), Parent
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What we know
The HPAI outbreak has already claimed 8 million turkeys
These turkeys represent over 3% of projected 2015 slaughter
3% loss alone wipes out projected 2015 bird increase
Turkey losses not reflected in April USDA Poultry Slaughter report, did in May
Both turkey and chicken losses need to stop before we know it’s over
Losses are not limited to growout birds, breeding stock is also affected
Breeding stock losses will show up later in the year
Turkey supply chain includes 4 breeding multiplier levels, significant time lags involved
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What we do not know
The transmission vector, and how to defeat it
Ultimate 2015 turkey losses
Age and sex of the culled flocks
Timing of bringing affected facilities back into production
Will affected facilities break with HPAI again?
Current outbreak losses
Potential Fall 2015 outbreak losses
Precise degree to which the supply flock chain will be disrupted
Degree to which breeders can and will offset losses via molting hens
Are companies willing to place surplus hens to replace lost toms?
The surplus turkey hen “resource”
Urner Barry Weekly Hatchery Report
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But, hen meat cost more per pound
Genetics innovation has resulted in toms far outperforming hens on daily gain and feed efficiency
20 week old Hybrid Converter Hen weighs 26.5 pounds
20 week old Hybrid Converter Tom weighs 42.7 pounds
Difference in meat production weight is about 38%
20 week feed conversion also better for toms, 2.58 vs. 2.89 for hens, a 12% difference
Each takes the same shackle space and labor to process
To get the same meat production:
 Need to grow and process 38% more turkeys
Using 12% more feed per pound produced
And possibly run a processing line on overtime
Explains why we have all these surplus hens in the first place!
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Does not include losses
with bird count reported
as “pending” by APHIS.
Including estimated
“pending” turkey facilities
loss brings the current
turkey loss over 8 million
birds.
Reported HPAI Bird Losses
As of 6-11-15
Species
Turkeys
Commercial
Layer Chickens
Pullet Chickens
Grand Total
Birds Lost Flocks Affected
7,978,100
152
7,978,100
152
34,358,100
35
5,873,700
14
48,088,793
221
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Losses from birds killed and destroyed
Current turkey loss is
about the same as 2015
planned production
increase, but does not
include all breeder losses.
Turkey and egg losses will
extend into 2016.
Turkey loss is significantly
more than just the loss of
current birds shown in
this table. Egg loss is also
understated.
Meat and Egg Production Loss
Species
Loss, Millions
Turkeys, RTC Lbs.
191
Eggs, Million Doz
959
2015 Production Loss as % Total Production
Species
% Loss
% Turkey Meat Lost
3.3%
% Eggs Lost
11.4%
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10
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The replacement
schedule gets
bunched up in July
and August.
We do not have the
poult production
capacity to make this
possible.
Some growout
facilities will remain
empty longer than 90
days due to no poult
supply to repop.
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Estimated further turkey losses
Ag Forte (Wilmar) forecasts 20% loss of their tom poults from August through rest of 2015
Industry-wide, poults will be in short supply through early 2016
Tom poult shortage pushes production shortfalls into April-May 2016
Likely to see hen destruction drop to near zero
But about 38% fewer live pounds for same weeks on feed
Hen feed efficacy also 12% worse than toms
Significant effect on July-December production
Higher costs per pound for processors
Estimates do not include further loss from current or future HPAI outbreaks
Once the outbreak ends, cannot immediately replace all losses
Not enough poults available
Resulting surge in market weight birds would exceed processing plant capacity
Estimated total 2015-16 turkey losses
Currently reported (6-26-2015) flock losses would have produced about 190 million RTC pounds
Second half loss is based on Ag Forte breeder loss and full placement of surplus hens
Ag Forte breeder loss is 6.5% of the standing breeder inventory
Affects both back half hen and tom poult supply
Reduces U.S. turkey poult supply by about 9 million, 51% toms and 49% hens
Total lost production, hens and toms, 210 million RTC pounds
After replacing lost hens with surplus hens still have 1.2 million hen surplus left
Hens produce only about 62% of pounds as toms at the same age
Feeding those 1.2 million hens to 20 weeks produces 22 million RTC pounds net gain
Net effect is still a loss of about 188 million RTC pounds, about same as current death loss
Loss extends into 2016
Total loss is about 380 million RTC pounds, 6.2% of pre-loss 2015 USDA RTC forecast
This is a best case estimate, actual loss will be higher
Poult supply flow will not be sufficient to replace all flocks within 90 days
Assumes no further losses, all available “surplus” hens used and fed to 20 weeks
Further losses are uncertain, possible fall outbreak not in these estimates
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Conclusions
Now by far the largest poultry flu outbreak in U.S. history
Significant financial impact for affected turkey and layer flock growers/owners
Export losses will help reduce production impacts on overall domestic turkey and egg prices
White meat turkey has no significant export market, entire shortfall falls on U.S. consumption, higher prices
Positive for whole bird turkeys and breast meat prices, new record highs for May/June
Dark meat turkey and chicken parts prices to remain depressed
Sufficient holiday whole bird turkey supply, prices will be somewhat higher
Significant impact on egg and egg products supply and prices
11+% loss for period while all affected flocks out of production
25+% loss of breaking supply affects bread, pasta, ice cream and other food items
Will take up to 12-24 months to get back to full production – limited pullet supply and need for staged replacement
Table eggs likely to be diverted to breaking
Egg product spot prices far above prior records, some imports coming in
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February NTF Outlook Summary
2015 Turkey Forecast Overview
(Production, Use and Stocks in Million Pounds)
2014/15
Pct.
Change
2012
2013
2014
Feb
2015f
211
296
237
193
-18.6%
Production
5,889
5,729
5,755
6,075
5.6%
Total Supply (Inc Imports)
6,124
6,047
6,021
6,296
4.6%
798
759
804
800
-0.5%
5,030
5,051
5,024
5,221
3.9%
Item
Beginning Stocks
Exports
U.S. Consumption
Per Capita (Lbs.)
Total Use
Ending Stocks
16.0
16.0
15.8
16.2
2.5%
5,828
5,810
5,828
6,021
3.3%
296
237
193
275
42.5%
UB 12 Lb Hen Price, $/lb.
$1.096
$1.042
$1.120
$1.060
-5.4%
UB 16 lb Tom Price, $/lb.
$1.101
$1.036
$1.120
$1.060
-5.4%
UB Breast Meat, $/lb
$2.067
$1.850
$3.430
$2.400
-30.0%
UB Thigh Meat, $/lb
$1.232
$1.298
$1.684
$1.200
-28.7%
UB MST, $/lb
$0.353
$0.380
$0.409
$0.275
-32.7%
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June 10, 2015 NTF Outlook Summary
2015 Turkey Forecast Overview
(Production, Use and Stocks in Million Pounds)
2014/15
Pct.
Change
June
2015f
2014/15
Pct.
Change
2012
2013
2014
Feb
2015f
211
296
237
193
-18.6%
193
-18.6%
Production
5,889
5,729
5,755
6,075
5.6%
5,600
-2.7%
Total Supply (Inc Imports)
6,124
6,047
6,021
6,296
4.6%
5,822
-3.3%
798
759
804
800
-0.5%
675
-16.0%
5,030
5,051
5,024
5,221
3.9%
4,947
-1.5%
Item
Beginning Stocks
Exports
U.S. Consumption
Per Capita (Lbs.)
Total Use
Ending Stocks
16.0
16.0
15.8
16.2
2.5%
15.4
-2.5%
5,828
5,810
5,828
6,021
3.3%
5,622
-3.5%
296
237
193
275
42.5%
200
3.6%
UB 12 Lb Hen Price, $/lb.
$1.096
$1.042
$1.120
$1.060
-5.4%
$1.200
7.1%
UB 16 lb Tom Price, $/lb.
$1.101
$1.036
$1.120
$1.060
-5.4%
$1.200
7.1%
UB Breast Meat, $/lb
$2.067
$1.850
$3.430
$2.400
-30.0%
$3.700
7.9%
UB Thigh Meat, $/lb
$1.232
$1.298
$1.684
$1.200
-28.7%
$1.300
-22.8%
UB MST, $/lb
$0.353
$0.380
$0.409
$0.275
-32.7%
$0.350
-14.4%
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HPAI Flock Infection and Poultry Export
Restriction Resources
Flocks affected:
http://www.aphis.usda.gov/wps/portal/aphis/ourfocus/animalhealth/sa_animal_disease_information/sa_avian_health/ct_avian_influenz
a_disease/!ut/p/a1/lZHLcoJAEEW_xUWW1IzDewm-QCUmGoOwodoBZKpgoGC0Sr8-EjKLCRmdt1979Tt0yhEGxRyOLAdCFZyyM91qEXThUP6NibuZGWOsPv6OfaMuS4vHKUVBK1gMLEcRZ9jjBWDYHdoO0Pd9DB2tef8-MGz8F9H4UopFxUIkMBVBlrIlpykXAR5WxbQ318wQ1E5b6O0pLum0sFnBWQR1kCucjuOzFrEmiSiPG0rIsLhOv4wID_6Km4NVpZvk_4Cb6N5zAVZTEKts
RMsUYSSTb6ICl0K0uggioRNU7jmFJdlvVr-F_7TUZ2u994_qbPpgTP1Jugi9F0AEwaAnrDxGaClr9M_X0iZuS2ht4u_ZbEJl0pok2nZSv4zvKaNNB2bdRO4vVc1CVbFeF4asLZ3TR1r4w6PV630Bp5beKA!!/?1dmy&urile=wcm%3apath%3a%2Faphis_content_library%2Fsa_our_focus%2Fsa_anima
l_health%2Fsa_animal_disease_information%2Fsa_avian_health%2Fsa_detections_by_states%2Fct_ai_pacific_flyway
Export restrictions by country of destination:
http://www.fsis.usda.gov/wps/portal/fsis/topics/international-affairs/exporting-products/export-library-requirements-by-country
FarmEcon HPAI Impact analysis updates:
http://www.farmecon.com/Documents/HPIA%20Update.pptx